Fin-X Wealth Pulse 17th July 2025

Australian unemployment rose in June on the back of higher participation. Overall, the data indicates a gradually weakening labour market, making a strong case for a rate cut at the August meeting.

• Australian unemployment rose from 4.1% to a 4-yr high of 4.3% in June on a seasonally-adjusted basis, according to the ABS.

• +2.0k jobs were added to the economy, being +40.2k new part-time while giving up -38.2k full-time roles.

• The May numbers were slightly revised from -2.5k new jobs to -1.1k.

• The underemployment rate rose by +0.1% to 6.0%, while the underutilisation rate, which combines the unemployment and underemployment rates, rose by +0.3% to 10.3%.

• The participation rate increased from 67.0% to 67.1%.

• As a consequence, the number of unemployed persons rose by +34.0k, accounting for most of the rise in unemployment.

• The employment-to-population ratio remained at 64.2%.

• Hours worked fell 0.9 per cent in June, following a rise of 1.4 per cent in May, due to the replacement of full-time jobs with part-time work.

• S&P/ASX200 8,624 +0.7%, AUDUSD 0.6478 -0.77%, Aus 2yr 3.35% -9bps, Aus 10yr 4.34% -6bps

Fin-X Wealth View

• The seasonally-adjusted headline figures likely exaggerate the weakness in the labour market as the series is notoriously noisy. However, the gradual weakening is still visible in the trend series.

• There's no cause for alarm. Unemployment is still well below pre-pandemic levels, and employment-to-population and hours worked remain close to record highs.

• That said, the RBA has been keen to hang on to as many jobs as possible while prioritising the fight against inflation. This latest update will provide more confidence that the economy and inflationary pressures are cooling.

• Last month's split decision to hold was a matter of timing, according to Governor Bullock. Coupled with ongoing tariff threats overseas, the softening labour market now makes a very strong case for an August cut. The market is now pricing a 100% probability of a cut, and the chances that the Board will choose to resist market pricing for a second month in a row seem very low.

• The bigger question is whether the cutting cycle will reach a low near 3.0% in mid-2026? At the moment, the market is still suggesting it will, albeit with a slightly higher risk that rates will need to head lower.

• A bigger tariff shock would push it lower. But overnight, Bloomberg reported that President Trump is taking a softer tone with China in the hope of securing a trade deal, with speed being more important than quality, citing White House sources. If correct, the rate cycle might prove to be shallower with a growing number of currencies seeing a pick-up in fiscal spending.

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